The Validity of the Event-study Approach: Evidence from the Impact of the Fed's Monetary Policy on US and Foreign Asset Prices
(2011) Economica — Vol. 78, n° 311, p. 429-439 (2011)
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- Abstract
- This paper documents the effects of changes in US monetary policy on asset prices in 51 countries to evaluate the validity of the event-study approach. We find that the event-study estimates contain a significant bias. However, this bias is fairly small and the ordinary least squares approach tends to outperform in an expected squared error sense the heteroscedasticity-based estimator for both small and large sample sizes. Hence in general the event-study methodology should be preferred. Moreover, we show that US monetary policy has been an important determinant of global financial markets. © The Author. Economica © 2009 The London School of Economics and Political Science.
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Rosa, C. (2011). The Validity of the Event-study Approach: Evidence from the Impact of the Fed’s Monetary Policy on US and Foreign Asset Prices. Economica, 78(311), 429-439. https://doi.org/10.1111/j.1468-0335.2009.00828.x (Original work published 2011)